I just upgraded to WordPress 2.3. While I was still at 2.2.3 I went through each plugin, upgrading each one as needed[0], and then used Subversion to upgrade WordPress (svn sw http://svn.automattic.com/wordpress/tags/2.3). Works great. Seems a lot faster now, too.
I’m not quite sure how I’ll use tagging separately from categories yet, but I’m sure a reason will present itself sometime soon.
[0] I only use four plugins, so this was easy. FeedBurner FeedSmith, Google XML Sitemaps, Popularity Contest, and Share This.